A city-owned building and aging shopping center in South San Francisco could one day be the site of a first-of-its-kind city-designed, owned and operated below-market-rate housing development.
The idea was floated by Councilmember James Coleman this week, and the council agreed to move forward with the idea, directing staff to conduct further research on the option. The envisioned development would incorporate retail space combined with up to 1,000 units of affordable housing for residents of varying income levels.
“This presents us an opportunity to try something new,” Coleman said. “Because right now we live in the most income segregated period in American history.”
The existing building at 33 Arroyo Drive, currently the city’s municipal services building, will no longer be needed upon the completion of a new civic center being constructed across the street. The owners of the shopping center, the council hopes, will partner with the city for the proposed housing project.
Unlike other affordable housing developments, the proposal is unique in that the city would be both owner and operator. While other cities, including San Francisco, have done this, it would be a first for South San Francisco.
The endeavor could prove to be tricky for the city, Nell Selander, Economic and Community Development Department deputy director, said.
“We’re really not set up to operate housing,” Selander said. “At least not at scale, and so that would be a substantial lift for this city.”
The city traditionally partners with developers, often nonprofits in the case of below-market-rate projects, who build and manage the property. The city would need to hire more staff — potentially even create a new department for the task.
But Mayor Mark Addiego said he would like to see the city pursue the project nonetheless.
“When we get in bed with nonprofit developers, what we give up is property tax,” Addiego said. “That, at some point, becomes an impact to the entire operation that it may not be able to support. You need your healthy tax dollars to make everything work.”
Coleman said a private developer would not be able to maximize the potential for affordable units at the site, as they would be interested in turning a profit.
Aside from logistic challenges, the project’s ultimate viability will be up to voters, likely in June of next year. Per Article 34 of the California Constitution, voters must first approve any publicly funded housing. The council last month directed staff to draft a ballot measure for the purpose.
In the event of a failure to reach an agreement with the shopping center owner, the city could build a smaller housing development on its portion of the lot with a maximum of 400 units. The city-owned portion of the lot is 2.2 acres while the shopping center sits on 4 acres.
A noncity run development could also be built, using traditional developers for either a market rate, partially affordable or completely affordable housing project.
Councilmember Buenaflor Nicolas voiced support for the city-run idea, but also recommended the city pursue an affordable housing developer in case things don’t work out.
“It’s a great plan, it is in the transit corridor, it’s a really prime property,” she said.
Vice Mayor Mark Nagales expressed approval for the city-run idea.
“There’s an opportunity here to really make an impact in terms of trying to do what we’ve always talked about and making sure that we provide affordable housing,” he said. “Potentially, we could have a project that does that.”
City staff will present their findings on the proposal at a future city meeting.
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